Is GBP going to stage a summer revival or will a dark cloud descend over it? Will we push higher or will Sterling be left wandering aimlessly like tourists in the sun at a food market on the South Bank?
Last week GBP/USD retreated from highs above 1.45 the figure after the Bank of England meeting and gave up its intraday gains to more or less go back to the opening price. We saw a further retracement lower towards the end of the week with a strengthening Dollar against more currencies. I expect further downside momentum for Cable (GBP/USD) albeit at a slow pace. I don’t see much behind Sterling in the short term and the non-event of ‘Super Thursday’ hasn’t changed my view. Indeed, Mark Carney said what everyone already knows that if the UK votes to leave the EU Sterling would fall further, perhaps sharply. Christine Lagarde, Managing Director of the IMF, weighed in last week to give the ‘Remain’ campaign a further boost by stating that a leave vote would cause severe damage to global growth. These views are nothing new and we’re going to have to bear with ‘Brexit’ talk for a while longer as it’s starting to feel like it’s gone on longer than an episode of the Great British Bake off.
Are you a USD buyer from GBP? If so, please do consider covering off some of your exposure. Cable (GBP/USD) is going to be fairly directionless over the coming weeks so we’re going to see some spikes on an intraday basis followed by some dips. I would suggest covering off some on SPOT and also implementing market orders around 1.44/1.4450 to take advantage of any moves to the upside. Please contact myself or one of the trading team to discuss appropriate levels. As you can see from the graph below GBP/USD was fairly choppy last week and I’d expect similar movements over the coming month with a slight bias to the downside.
The early 1.27s are providing resistance to GBP/EUR sustaining its upside momentum. I think the move is now running out of steam after a few attempts to settle above there. I expect GBP/EUR to come off again in the next few weeks. UK data is proving, on the whole, rather disappointing and I see a resurgence in the Eurozone if we park the Greek talks to one side. If you are a Euro buyer please do consider locking in some of your exposure on a SPOT basis to mitigate some of your risk. I expect us to challenge 1.25 to the downside in the coming weeks so if you can secure above 1.25 I would suggest that will be considering good value in the coming weeks. Please send me an email to discuss your upcoming requirements for the remainder of May and going into June. EUR seller? Stagger orders to the downside from 1.2650 to 1.25 to try and ‘average up’ your rate of exchange prior to June 23rd.
If you look at the graph below on GBP/EUR you can see the activity last week.
If you have any questions please do let me know.
Have a fantastic week.
Written by Liam Alexander